You work your entire life, saving until it hurts and putting away dollars bought with sweat and missed family time. Then, when you do finally get to retire, you look back on those dollars from thirty years ago, and they’ve lost an unexpectedly large amount of their value. In The Wall Street Journal, Judy Shelton, a monetary economist at the Independent Institute, discusses the systematic “debasing the value of the dollar” pursued by the Federal Reserve’s 2% inflation goal, and argues that instead, “Money should be an honest measure.” She writes:
“All those who wish to stop the drift toward increasing government control should concentrate their efforts on monetary policy,” observed Friedrich Hayek, who later won a Nobel Prize in economics, in “The Constitution of Liberty” (1960). Political and economic freedom are interconnected; expanding government control over the direction of the economy is cause for alarm.
That is why the Fed’s prominent role in channeling financial resources has become a campaign issue. Presidential candidates ought to have a view on the proper role of a central bank in a free-market economy—and be able to answer specific questions about potential reforms. Should U.S. monetary officials have a 2% inflation target? A Keynesian would be predisposed to say yes—a 2% target safeguards the Fed’s room to maneuver rates downward. But this is a recipe for systematically debasing the value of the dollar. One could argue that “stable prices” means zero inflation. Why should government be permitted to skim off the nation’s monetary store of value?
Money should be an honest measure—not merely an instrument of government economic policy. Its most important function is to provide reliable price signals so that Americans can plan how to pursue life, liberty and happiness. The U.S. dollar should be a dependable monetary standard—the most trusted currency in the world.
Action Line: You should be able to rely on your money. But you have to take inflation into account when it’s built into the system. When you want to talk about preparing for inflation in your retirement plans, I’m here.
